To join a real estate team or work as an independent real estate agent is a question that comes up in the business on a daily basis.
Many brand new agents often ponder this question. Even experienced agents, if not achieving the level of success they had hoped for, will stay awake in the middle of the night worried and wondering if they should get out of the business or join a real estate team.
Since it’s such a common question, we thought we would answer it here. Let’s take a look at some of the reasons for joining a real estate team versus going solo by looking at how different and important elements are handled.
Real Estate Leads When Going Solo
The number of leads available and the opportunity for leads is often the biggest factor people consider when joining a real estate team.
When you choose to go the solo route, you are choosing to generate leads on your own with some potential — but not guaranteed — support from your broker.
Luckily, a lack of lead generation opportunities isn’t really the problem or reason most real estate agents fail.
Websites like Zillow, Realtor, of Facebook (just to name the obvious) would love nothing more than to send you some leads.
All you have to do is give them some money. But, you have to know how much those leads are worth to your business.
We think about real estate leads a bit differently than most. It’s like a faucet. When you want some leads, you turn it on.
And that’s the problem. Most real estate agents never turn their lead generation on.
They are held back by fear and the cost of leads. No matter how you choose to get leads as an individual agent, you will have to pay. It’s going to cost in time or money.
The real problem most real estate agents fail because they can’t figure out how to acquire leads at the right cost — either in time or money — that makes it worth it for them.
The Cons Of Lead Generation Going Solo
Real estate agents that go solo often have a high cost for acquiring leads. Here is the progression I often see for many agents who go solo.
They start their lead generation by using their time. They spend hours and hours sitting on floor time and doing open houses, for example, that by the time they look at all of the effort to get and close a client, they realize they barely made any money.
So, they decide instead to trade time for money. The logic goes: if I can get some of my time back by paying for leads and using my saved time to complete more deals.
Once they get the first few deals done, they realize it’s not much better to pay for leads. By the time they pay the company they got the lead from, there is very little commission check left over for them.
Next, agents either decide to join a team, resign to this miserable fate, or get out of the business.
Here are the main cons of lead generation when going solo:
- Upfront Costs – individual agents often have to pay for their leads upfront. Meaning, you take money out of your savings or put the cost on your credit card.
- Risk – you might pay for leads and they don’t result in any sales. All of that money is lost.
- High Cost – leads in the real estate industry aren’t cheap.
A Practical Case Study: Zillow
As an individual agent, you have the opportunity to generate leads from Zillow through their Premier Agent platform. An individual agent will pay Zillow a monthly fee to Zillow and in exchange you will get some leads.
You are able to pick your budget and location for generating leads. That’s great if you want to work with leads around your office or where you live.
As a practical case study, I pulled data on Zillow from the area code 48823 or East Lansing, Michigan. The average home value is $220,000, which represents a $6,600 commission check. All seems good.
…until you dig into the lead costs. I set my budget at $1,746 and in exchange I will get 4.3 real estate leads. That’s an approximate cost of $400 per lead.
Not all of those leads will convert. If you’re lucky, and I mean lucky, then 5% of leads will convert. That means you need 20 leads before you can get a closed client.
To get 20 leads, with one of them being a closed client, you will need to spend approximately $8,000.
That’s $8,000 to make a $6,600 commission check. You would lose $1,400 every single time you closed a client.
Crazy…
… And yet, individual agents do this every day.
Let’s look at the data from Zillow in another way. Here we took the zip code 48837, which is Grand Ledge, Michigan. The return on investment in this area code, according to Zillow, is 0.57x.
That’s a fancy way of saying that for every $1 you invest, you will get $1 back and an additional $0.57 back. So, spend $1,000 and you will get $1,570 back. Spend approximately $4,200 and you will get $6,600 back (the commission check for a $220,000 house).
Your net profit on a $220,000 house is $1,400. For most agents, this is a small amount that comes back to them when they look at the hours they spend. Plus, this is BEFORE your broker takes their cut and you pay any other associated transaction fees.
Let me add another problem. That 0.57x calculation that Zillow uses? There’s a good chance it’s fluffed up. Newer real estate agents, without training, aren’t likely to have a good conversion rate on their leads.
Meaning, that reported 0.57x ROI calculation is likely to be much, much lower.
That’s the risk of going solo and being an individual real estate agent. Pay high monthly fees, hope you can convert the leads, and that you get your money back.
It doesn’t work for most real estate agents. They quickly realize they can make more money flipping burgers than they can being a real estate agent.
How Leads Are Handled On Teams
In most real estate teams, leads are provided to you on much favorable terms. Each real estate team structure might be different but here are some of the most common ones.
No Cost. Some real estate teams will have lead opportunities for you at no extra cost. There is no extra commission charge and there is no upfront fee or cost to you.
Transferred Costs. In some cases, a real estate team might reduce your commission for the lead or take a split fee on the backend. For example, you will receive a lead, close the lead and then pay 10% of the commission to the team.
The no cost leads are a huge benefit, of course. It’s also obvious how this benefits you. But what about the transferred cost leads?
These shift risk from an individual agent to the team. Here’s how.
Assume, you get a lead but for whatever reason, the lead doesn’t end up buying a home. This isn’t uncommon. For example, a buyer may become unqualified or just decide to wait to buy a home.
With a transferred cost structure, you don’t pay anything. If the lead doesn’t close, you’re not out any money. This is unlike the traditional Zillow leads we talked about earlier.
In addition, a good real estate team will help you market to your database, sphere of influence, and friends and family. These groups are your bread and butter. They will give you the chance to earn higher commission splits and take home a better paycheck.
Commission Splits For an Individual Real Estate Agent
You’re almost always going to have better commission splits as a solo real estate agent.
Since real estate is local, each real estate broker — from Century 21 to Coldwell Banker — offers different commission split plans.
It’s common for new real estate agents to start at a 50/50 split and quickly ascend to a more favorable split, like 80/20.
For the lucky few that are able to succeed as an individual agent, commission splits can be as favorable as 90/10 or 100% after a certain amount is paid to the broker.
For example, at Century 21 Looking Glass, we offer a commission cap. After a real estate agent has a certain amount in commissions, they are able to keep 100% of their commission checks.
As an individual agent, you may also have desk fees or certain transaction fees. These are often much smaller than the commission splits. For example, it’s common to have a monthly desk fee that ranges from zero to $125 per month.
You may also have to pay E&O insurance on a monthly or per transaction basis, like $30 for every closed transaction. It’s unlikely you will see as many fees when joining a real estate team.
So, while you may have a better commission split, you may have additional fees.
Take a look at how Century 21 Looking Glass compares to Coldwell Banker Hubbell-Briarwood.
Commission Splits On Real Estate Teams
Just like real estate brokers, each real estate team will offer a different kind of commission structure and split. It’s common for buyer real estate agents to get 30 to 50% of the commission. For listing real estate agents, it’s around 10 to 25%.
Keep in mind each real estate team will have a different commission structure. I have heard of some loose real estate teams that have higher commission splits, provide limited support, and ask you to pay the real estate broker from your commission split.
For example, you may get 60% split and then you are required to pay a 70/30 split to your broker. So, at the end of the day, you get 70% of 60%, which is a 42% split on the commission check.
There are also two common ways real estate agents are able to increase their commission on real estate teams.
First, agent commission splits might increase as certain goals and metrics are reached. For example, a buyer’s agent might graduate from 40% to 50% after closing 15 deals, then graduate to 60% after 40 deals. This creates a competitive environment which some agents love.
Second, agents can increase their split based on the source of the deal. If a deal comes from a lead that is provided by the real estate team, they may only get 30% of the commission. If on the other hand, the lead comes from marketing done to their sphere of influence, they may get 60% of the deal.
On a real estate team, you will be expected to generate business from your own sphere of influence, friends, and family. At the Dolinski Group, we help you take care of the marketing to your database through email marketing campaigns and Facebook ads.
In addition, on a real estate team you’re able to pass off some of the expenses and tasks to the team, allowing a real estate agent to focus on dollar productive activities (or DPA). Instead of focusing on transaction management and paperwork, you can focus on activities that lead to an income, like prospecting, showing homes, lead follow up, etc.
Training & Accountability
When it comes to training and accountability, it’s almost always going to be better on a real estate team.
At worst, you get the same exact training and accountability on a real estate team as you do going solo. At best, you get individualized one-on-one mentorship that you can’t get anywhere else.
When you join a broker — regardless of whether or not you’re on a team — you will have access to training provided by the broker. And when you join a real estate broker that is part of a franchise, like Century 21, you will have access to training classes and resources online.
CENTURY 21 University® is a comprehensive platform that offers programs designed to transform skills, knowledge and habits. They offer multiple formats. Video library, live-online, self-paced courses, and more.
- Topical webinars compatible with most mobile devices, covering a variety of topics. Most are 60 minutes in length.
- Designations and certifications with the National Association of REALTORS®
- Continuing education accredited courses
- Niche market and commercial courses and webinars
When you join a team, you become part of the broker and have access to all of these resources.
Real estate teams are able to offer one-on-one training. You see, the real estate industry is full of information about how to be successful as a real estate agent.
The hard part is knowing what advice to listen to and where to start. How do you know what information to trust and rely on?
A coach, mentor, or one-on-one guidance can go a long way. They can provide “on the job” training such as going with you on a listing appointment.
It’s one thing to watch a video and another to go do a listing appointment.
Hands down, real estate teams can offer way more training and support than going solo can. Unless, of course, you pay for it with your own money, which you can do. It’s not uncommon for real estate coaches to charge $500+ a month or more.
The Cons of Going Solo
The traditional model of going solo as a real estate agent at brokerage can be described as cut-throat. Everyone is competing with each other.
The real estate agent next to your office is competing with you. While they might seem to want to help you, they are just as equally likely trying to get the lead from you. The competitiveness is the reason the cost of leads on platforms like Zillow is so high.
In the traditional solo approach there is no team work. It’s a closed door approach. Everyone is an individual and there is no common goal or greater purpose. There are no standards or expectations. Limited culture exists.
A traditional broker won’t care about your personal agent production. They only care about how many homes they sell and the broker’s production. Instead of developing agents, they look to add more agents. They will hire anyone and don’t have any standards for hiring.
The Potential Cons of Real Estate Teams
Joining any real estate team is not a guarantee of a better outcome than going solo. In fact, you have to join the right real estate team. The wrong real estate team can be just as problematic as going solo.
Poorly run real estate teams often operate on a shark-feeder model whereby they pass off only the undesirable leads to their team members.
The team leader will work with the most desirable clients and pass off the problematic customers and low-income opportunity customers to their teams. It also means a real estate agent starts to compete with the team leader.
Many real estate agent teams are started because a team leader has more leads than she can handle. As a result, they are spread thin and have limited time to train or mentor.
They are too busy trying to get their own customers and complete their own deals that they have no time left over for you.
Why Join The Dolinski Group At Century 21 Looking Glass
In 2016, we saw the traditional individual and real estate team model was flawed so we created a hybrid approach. We took all of the benefits of real estate teams and got rid of the negatives.
Since our founding we have sought to maximize agent production, create a higher standard for service and culture, and offer training and done-for-you support that allows you to specialize.
At the Dolinski Group, we have a higher standard of hiring and we don’t just take anyone. You can learn more about potential real estate careers and jobs we have at the Dolinski Group.
We offer accountability so you know how and when to follow up with leads. Take all of the guesswork out of lead follow up and eliminate income uncertainty.
Summary
The most important question isn’t whether or not to join a real estate team. The most important question is what real estate team to join.
You need to consider how each team is set up, their commission structure, their lead opportunities, their culture, and more.
Look for a real estate team that is part of a national brand that offers support and done-for-you services so that you can focus on being a real estate agent and meet your income goals. Find one that is involved in the development of their real estate agent team members and has the resources to help their agents be more efficient.
A great example of this type of real estate team is Century 21 Looking Glass Dolinski Group. Apply to join our team today.
